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Its promoters say it's a
"jobs program." Its detractors say it smells more like corporate welfare.
Who's right?

Admittedly, it's a little
bizarre ideologically. The recipients are often the same folks who praise
free private enterprise, repeat "marketplace regulation" like a mantra
and oppose universal health care and safety and environmental regulation
as "socialistic."

Governments run programs
such as schools and libraries and contract for services such as road building.

But I always thought private
enterprise was supposed to rely on private capital, dangling before investors
both the risks of bankruptcy and the rewards of riches.

What do you call an economic
system in which corporate and governmental profits and power are mixed
together like a salad?2

Labels aside, if a business
can't garner the support of sophisticated investors and loan officers,
shouldn't we think twice before filling its tin cup with public money?
As it is, one-third of the 800,000 private start-ups each year fail by
year four.3 In 2003, a North Liberty bakery
closed a mere six months after getting $7.9 million from Iowa's taxpayers.4

It's understandable that
promoters of the Iowa Values Fund want to call it a "jobs program" rather
than an "enrich the wealthy" program. But is it?

Isn't giving CEOs this money
another example of economist John Kenneth Galbraith's observation that
"if you feed the horse enough oats, something will pass through to the
road for the sparrows"?5 Shouldn't CEOs be
satisfied they're already earning 400 times their employees' wages?6

How much are we paying for
these jobs? Might it be more profitable to train Iowans for the skilled
labor and professional jobs going elsewhere?

If we really want to create
jobs with taxes, let's do it directly. There were 50,000 Iowans among the
3 million in President Franklin Roosevelt's Civilian Conservation Corps.7
They built many of our state parks -- at a miniscule fraction of the Value
Fund's $700 million.8

Not interested? Then stop
talking about transferring public wealth to private business as a "jobs
program." Don't count jobs moved from one Iowa town to another, or that
pay less than a living wage.

Wells Fargo had revenue of
$33 billion last year.9 So why did Iowans give
the firm $54 million in 2003 when it already had 8,000 employees here?
(State and cities contributed $28 million in periodic cash grants and $26
million for infrastructure.) CEO Pete Wissinger had acknowledged the role
of "intangibles" in site selection, and that other states offered more
cash.10

Even if bribery did work,
aren't firms that blackmail us into government largesse the ones most likely
to leave for even bigger bribes? And how can we distinguish genuine threats
to leave from negotiating ploys?

How can the public or media
evaluate these grants? There are numerous programs and hundreds of recipients.
There is little follow-up, and what there is sounds more like cheerleading
than analysis of hard data.

Nor should we overlook the
potential linkage between governmental largesse and campaign contributions
that either precede or follow the grants. With the mounting cost of Iowa's
political campaigns, the temptations are there. Iowans deserve to know
what contributors are getting for their money.

The prestigious, independent
Corporation for Enterprise Development concludes that "most economists
agree incentives are not good development policy" because they foster unfair
competition, don't create net new jobs and divert attention from better
strategies.11

We know the value of the
Iowa Values Fund to the politicians who give away our money, and to the
businesses that receive it. What Iowans want to know is the value of the
program to those who are paying for it.________________NICHOLAS JOHNSON teaches
at the University of Iowa College of Law.

2. Give up?
The answer would be "corporatism" (and some would say, "fascism"). The
reason the answer is not provided in the published version, but only in
an endnote in the online version, is that such words are so inflamatory
-- because they have taken on a pejorative meaning -- that any use of them
totally diverts the reader's focus away from the subject at hand. The Wikipedia
entry for "Corporatism," and its subheading, "Corporatism and Fascism,"
discuss the subject.

"Corporatism [emphasizes]
the role of business corporations in government decision-making at the
expense of the public. The power of business to affect government legislation
through lobbying and other avenues of influence in order to promote their
interests is usually seen as detrimental to those of the public. In this
respect, corporatism may be characterized as an extreme form of regulatory
capture, and is also termed corporatocracy.. . .

"There is a very old argument
about who controlled who in the fascist states of Italy and Germany at
various points in the timeline of power. It is agreed that . . . the big
corporations ended up with much more say in decision making than other
elements of the corporative state. There was a power struggle between the
fascist parties/leaders and the . . . big corporations. It waxed and waned
as to who had more power at any given time. Scholars have used the term
'Mussolini's corporate state' in many different ways.

"In the United States, corporations
representing many different sectors are involved in attempts to influence
legislation through lobbying. . . . They can often wield considerable power
over law-makers."

3. For support
of the business failures statistics see Brian Headd, “Redefining Business
Success: Distinguishing Between Closure and Failure,” Small Business Administration,
Small Business Economics, 58-59 (2003), http://www.sba.gov/advo/stats/bh_sbe03.pdf
, for conclusion that 1/3 of all new business startups fail within 4 years
(actually one-half are no longer operating four years after startup, but
only 1/3 can be fairly characterized as having “failed”). There are 25
million U.S. businesses. BizStats.com, “Total Number of U.S. Businesses,”
http://www.bizstats.com/businesses.htm.
There are 800,000 new businesses annually (1990s), http://h50055.www5.hp.com/smb/au/resources/entre.aspx.
Link no longer active; for similar numbers see, The Public Forum Institute,
“National Dialogue on Entrepreneurship,” from http://www.publicforuminstitute.org/nde/entre/index.htm
(last visited March 29, 2006).

11. For
many resources from an organization devoted to aiding states and communities
with rational, best practices for economic development see CFED (Corporation
for Enterprise Development), http://www.cfed.org
(last visited March 29, 2006). For its analysis of current business development
practices see “Business Incentives Reform,” available from, http://www.cfed.org/focus.m?parentid=2&siteid=1629&id=1630
(last visited March 29, 2006).